Mining News

CEOs: Barrick-Newmont JV Would Be Third-Largest Gold Co. In World

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(Kitco News) - With their joint venture for Nevada operations announced Monday, Barrick Gold Corp. (NYSE: GOLD; TSX: ABX) and Newmont Mining Corp. (NYSE: NEM) are going from “good neighbors” to partners in what would be the third-largest gold mining company in the world, the companies’ chief executive officers said.

They declined to comment on whether the joint venture could lead to an even bigger deal, but both expressed optimism that the synergies would free up cash to pay still-larger dividends to their shareholders.

Barrick will have the larger share of the joint venture and will be operator. With the deal, Barrick officials said they are withdrawing their previous offer to try to acquire Newmont. The joint venture is not a complete surprise, as Newmont had proposed talks for a JV when rejecting the Barrick merger offer, and news reports last week said the companies were engaged in talks on a possible joint venture.

Goldcorp Inc. subsequently issued a statement saying that it supports the Newmont-Barrick joint venture. Earlier this year, Newmont and Goldcorp agreed to a merger in which Newmont will acquire Goldcorp, but the Barrick takeover proposal would have scuttled the Newmont-Goldcorp deal.

About an hour after the two companies formally announced the joint venture, Barrick CEO Mark Bristow and Newmont CEO Gary Goldberg held a conference call with analysts, speaking from Elko, Nevada. Both called the joint venture a “historic” pact that would allow the companies to capture synergies from their large Nevada operations.

“Our joint venture will allow us to tear down the fences and operate our assets as one mining complex, making the best use of our combined infrastructure and running the most profitable and sustainable long-term gold-mining business in Nevada,” Bristow said.

He said the joint venture “also puts us in a position to invest more capital in our collective mines and projects.”

Bristow commented that the joint venture will have three tier-one assets, had output of 4.1 million gold ounces in 2018 at all-in sustaining costs of $775 an ounce, well below current gold prices, and will have a reserve base of 48 million ounces. The companies will share in an estimated $5 billion in synergies, Bristow said.

Goldberg pointed out that Newmont has operated in Nevada since 1965 and Barrick since 1986, meaning more than eight decades of combined experience operating in the state.

“During that time, our teams have been good neighbors, helped each other out during emergencies, and more recently together to make our joint venture at Turquoise Ridge a success,” Goldberg said. “Today, after more than two decades of looking at opportunities for further cooperation, we have reached a historic agreement to harness the power of both companies’ assets here in Nevada to create an even more efficient business in one of the richest gold districts in the world.”

Goldberg said his board of directors voted unanimously in favor of the new joint-venture agreement.

“We will create the world’s largest gold-mining complex and the third-largest gold-mining company here with world-class ore bodies and processing facilities in one of the most favorable mining jurisdictions,” said Goldberg.

At another point during the conference call, Bristow also alluded to the joint venture as being the third-largest gold company on the planet, with the parent companies being the only ones that are larger.
The joint venture will be 61.5% owned by Barrick and 38.5% by Newmont. Bristow explained that the split was based on analyst consensus estimates of the two companies’ values in Nevada.

Newmont previously called for a JV with a 55%-45% split. The difference between this and the eventual agreement was the exclusion of Newmont’s Cripple Creek and Victor Mine, located in Colorado, Goldberg said.

The companies reported that assets in the JV would include Barrick’s Goldstrike, Cortez, Turquoise Ridge, Goldrush and South Arturo, while Newmont would contribute Carlin, Twin Creeks, Phoenix, Long Canyon and Lone Tree. The JV would also include associated processing facilities. Some of the development assets are excluded for now but could be added at a later date, officials said.

Barrick will have three board seats and Newmont two, reflecting ownership levels. However, the technical, finance and exploration advisory committees will have equal representation from the two companies.

The two CEOs both declined to comment when they were asked whether the joint venture might be a stepping stone for a larger deal.

“You guys are never satisfied,” Bristow said to analysts with a laugh.

However, they were upbeat when asked if the synergies from the joint venture might mean higher dividends for shareholders.

“Of course,” Bristow said with a chuckle. He later added, “If we deliver what we believe is possible, we will free up extra cash flow for our respective shareholders.”

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